Financial Irregularities Alleged : Ex-Ceradyne President Files Lawsuit Over Firing
The former president of Ceradyne has sued the company, claiming he was wrongfully fired after he complained that the Costa Mesa firm’s financial statements contained “major irregularities.”
The lawsuit by John J. Carberry, filed Jan. 22 in Superior Court in Santa Ana, seeks total damages of $2.5 million from Ceradyne and its chairman and chief executive, Joel P. Moskowitz.
According to the suit, Carberry--who always had received “positive and satisfactory” job reviews at the company--was fired without notice in September after he complained that the company’s inventory was overvalued.
Carberry joined Ceradyne in 1983 and held several executive posts. He was promoted to chief operating officer in late 1985 and to president in January, 1987.
‘Refused to Keep Silent’
The suit alleges that Carberry was fired because he “refused to keep silent about financial irregularities” at Ceradyne.
Moskowitz was out of town Friday and was unavailable for comment. James W. Kerrigan, Ceradyne’s chief financial officer, said the company had no comment on the suit.
The suit alleges that Carberry told Moskowitz and other company officers and directors that the firm was in potential violation of federal securities laws because of certain accounting methods.
Specifically, the suit charges that Ceradyne inaccurately inflated the value of certain inventories and failed to make other accounting adjustments that would have resulted in at least $4.4 million in charges to the firm’s balance sheets and income statements over several years.
The suit alleges that Carberry “consistently urged” Moskowitz and other Ceradyne officers and directors “to make the corrections in the accounting procedures so as to present a true, accurate and proper presentation” of Ceradyne’s financial status.
Lost $2.76 Million
Ceradyne, a manufacturer of high-technology ceramic components, lost $2.76 million on revenues of $5.57 million for its third quarter ended last Sept. 30. The company attributed the third-quarter loss to a variety of factors, including a decline in product shipments, higher costs of sales and a reduction in the value of its inventory of graphite tooling.
Ceradyne also has said it expects to report a fourth-quarter loss. The company will report its 1987 results in late March.
Separately, Ceradyne filed its own suit against Carberry in U.S. District Court in Santa Ana, seeking recovery of $45,325 for loans the company made to him and of $16,856 in profit he made on Ceradyne stock. That suit also was filed in January.
Carberry, who now works for a Newport Beach marketing company, said Friday that he was questioned last fall by Securities and Exchange Commission officials in Washington about Ceradyne’s financial accounting practices.
Chiles Larson, an SEC spokesman, said the agency’s policy is to withhold comment on whether it has started an investigation of a company.
Besides manufacturing ceramic components, Ceradyne is developing a ceramic automobile engine in a joint venture with Ford Motor Co. In March, 1986, Ford paid $10 million for an 11% stake in Ceradyne.
